Norwegian telecommunications firm
Telenor increased its stake
last week in Russian mobile service provider VimpelCom (
) from 31.7% to 35.7%.
Telenor is looking to take advantage of a depressed share price
and to increase its exposure to the profitable and fast
fast-growing Russian mobile market.
VIP's share price has come under pressure of late as the
result of a drawn-out negotiation process over its merger with
Egyptian Orascom Telecom and the Algerian government.
Orascom's Algerian subsidiary Djezzy owed the Algerian
significant back taxes;
as a result, the Algerian government is demanding a controlling
stake in Djezzy and threatening to levy a $1.25 billion fine on
VIP in order to obtain its money. VIP is threatening to contest
the fee in both Algerian and international courts.
Fears that talks between the two parties will dissolve have
pushed VIP's stock lower. However, these concerns may be
premature as Algerian officials claimed Monday that
negotiations between Algeria and VIP are still
While uncertainty over VIP's North African ventures may
pressure the stock in the short-term, investors with a longer
time horizon could follow Telenor's lead and take advantage of
attractive entry point.
Like other emerging market telecom firms, VIP will continue to
the increased penetration of smart devices
and a concomitant rise in lucrative mobile data revenue. Given
the positive macro trends in the sector, combined with a
projected annual growth rate of 26% and a strong free cash flow
position, VIP could be a good buy at these levels.